886 F.

2d 673
RICO Bus.Disp.Guide 7317

David T. COMBS; Sarah E. Combs, Plaintiffs-Appellants,

v.
James O. BAKKER; Tammy Faye Bakker; Richard Dortch,
Defendants-Appellees.
No. 88-2897.

United States Court of Appeals,

Fourth Circuit.
Argued March 7, 1989.
Decided Sept. 26, 1989.

Edward G. Connette, III (Louis L. Lesesne, Jr., Gillespie, Lesesne &

Connette on brief) for plaintiffs-appellants.
Mark Timothy Calloway (James, McElroy & Diehl, P.A., on brief); James
Huston Toms (Toms & Bazzle, P.A., on brief), for defendants-appellees.
Before ERVIN, Chief Judge, PHILLIPS, Circuit Judge, and WILLIAMS,
District Judge for the Eastern District of Virginia, sitting by designation.
PHILLIPS, Circuit Judge:

This is an appeal by David and Sarah Combs from the district court's dismissal
of their action asserting civil RICO and pendent state common law and
statutory claims against James and Tamara Bakker and Richard Dortch arising
from the defendants' allegedly fraudulent sale to the Combs of a "lifetime
partnership" in the "PTL" enterprise. On defendants' pretrial motions, the
district court dismissed the entire action on the basis that the complaint failed to
state a RICO claim, and that there was no basis under state law for personal
jurisdiction over the defendants with respect to the remaining pendent state-law
claims.

We vacate and remand for further proceedings.

* Because the case was dismissed at the threshold, the essential factual and
procedural background of this appeal can be quickly sketched.

As alleged in considerable factual detail, the gravamen of the Combs' complaint

was that the Bakkers and Dortch had fraudulently induced them, essentially by
misrepresentations of value, to purchase a "lifetime partnership" in the religious
enterprise known popularly as "PTL" of which these defendants were
principals. In separate claims the Combs alleged that these fraudulently induced
sales constituted civil RICO violations under 18 U.S.C. Secs. 1962(a), (c) and
(d) by virtue of interstate mail and wire facilities use and, pendent to that
federal claim, violations of state contract, tort and statutory law, whose exact
details need not be elaborated for purposes of this appeal.

The defendants, by separate Rule 12(b) motions, raised across-the-board

objections to the action, challenging the court's subject matter jurisdiction,
venue, and jurisdiction over their persons, the sufficiency of process and the
service of process, the sufficiency of the complaint to state a claim, and the
failure to join "PTL" as an indispensable party. Addressing directly only the
personal jurisdiction challenge under Rule 12(b)(2) and the sufficiency of
statement challenge under Rule 12(b)(6), the district court, ruling on the basis
of the complaint, the motions to dismiss and the Combs' response with
supporting legal memoranda, dismissed the action on grounds that intermixed
these two bases of challenge. In rough summary, the court's reasoning, adopting
the defendants' contentions, ran as follows. First, the complaint fails to state
facts sufficient to show the existence of the "pattern" of racketeering activity
which is an essential element of a civil RICO claim under each of the
subsections, (a), (c), and (d), invoked by plaintiffs. That requires dismissal of
the RICO claims under Rule 12(b)(6). With the sole federal claim therefore out
of the case, only the pendent state tort, contract, and statutory claims remain,
and as to them, personal jurisdiction can only be based upon state (here North
Carolina) statutes asserting grounds for jurisdiction. Looking to the North
Carolina statutory grounds specifically suggested by plaintiffs, none is
applicable to the state claims, hence all those claims must be dismissed under
Rule 12(b)(2) for lack of personal jurisdiction. On this basis, judgment
dismissing the action--on the merits as to the RICO claim, without prejudice as
to the pendent state claims--was entered.

This appeal followed.

II
7

We start with some awkwardness resulting from the district court's approach,

We start with some awkwardness resulting from the district court's approach,
which instead of addressing first the more fundamental challenge under Rule
12(b)(2) to personal jurisdiction with respect to all defendants and all claims,
addressed first the challenge under Rule 12(b)(6) to the merits of the RICO
claims as pleaded. As is evident from the court's analysis of both challenges, it
thought, though it did not expressly so rule, that it lacked personal jurisdiction
with respect to the RICO claim as well as the pendent state-law claims. While
we think that perception was incorrect, if it had been correct, as the district
court obviously thought, it would have precluded the court's reaching the merits
of the RICO claim on the 12(b)(6) challenge to its sufficiency as pleaded.

Nevertheless, given the posture in which we receive the case, we think our
proper course in review is to consider first whether the district court had
grounds for personal jurisdiction as to all or any of the claims, that being the
actual breadth of the defendants' Rule 12(b)(2) motion, and also the more
fundamental challenge. We can then appropriately address whether the RICO
claim was sufficiently well-pleaded to survive the Rule 12(b)(6) motion, if the
jurisdictional challenge as to that claim should first have been rejected.

* We see two basic errors in the district court's approach to and resolution of
the Rule 12(b)(2) challenge to the court's personal jurisdiction. First, tainting
the overall approach, was the court's apparent perception that the only basis for
personal jurisdiction in respect of the RICO claims was that embodied in the
nationwide service of process provisions of 18 U.S.C. Sec. 1965(b).1 That
perception is of course wrong. Personal jurisdiction of federal courts of course
may be grounded in state long-arm (or other) jurisdiction statutes in civil RICO
cases as in federal question cases generally. Fed.R.Civ.P. 4(c)(2)(C)(i), (e); see
ex rel. Long v. Alexander & Alexander Services, Inc., 680 F.Supp. 746
(E.D.N.C.1988). See generally Wright & Miller, Federal Practice & Procedure:
Civil Secs. 1075, 1113 (1987).

10

Here, having first concluded that no cognizable RICO claim had been
sufficiently pleaded, the district court then opined that as to the remaining
pendent state-law claims personal jurisdiction could only be grounded in state
jurisdiction statutes and turned to that as the only question now before it on
defendants' Rule 12(b)(2) challenges. On that question the court then
determined, for reasons to which we will return, that jurisdiction as to the
remaining pendent state-law claims could not be grounded in any of the state
long-arm provisions specifically urged by plaintiffs, and on that basis dismissed
those claims.

11

For reasons to which we will now turn, we think that the court's dismissal of

the state-law claims for lack of personal jurisdiction was premature and must
for that reason be vacated. And because, as our earlier discussion has indicated,
state law grounds for jurisdiction serve equally to support jurisdiction over
federal question claims, what we say about personal jurisdiction with respect to
the dismissed state-law claims would apply as well to the federal RICO claims.
12

As indicated, the error in dismissing the state-law claims was one of

prematurity. When a court's personal jurisdiction is properly challenged by a
Rule 12(b)(2) motion, the jurisdictional question thus raised is one for the
judge, with the burden on the plaintiff ultimately to prove the existence of a
ground for jurisdiction by a preponderance of the evidence. See generally 2A
Moore's Fed. Prac. p 12.07[2.-2]. If the existence of jurisdiction turns on
disputed factual questions the court may resolve the challenge on the basis of a
separate evidentiary hearing, or may defer ruling pending receipt at trial of
evidence relevant to the jurisdictional question. But when, as here, the court
addresses the question on the basis only of motion papers, supporting legal
memoranda and the relevant allegations of a complaint, the burden on the
plaintiff is simply to make a prima facie showing of a sufficient jurisdictional
basis in order to survive the jurisdictional challenge. Id. In considering a
challenge on such a record, the court must construe all relevant pleading
allegations in the light most favorable to the plaintiff, assume credibility, and
draw the most favorable inferences for the existence of jurisdiction. Id.
Properly assessed on that basis here, the plaintiffs made a sufficient prima facie
showing to survive the jurisdictional challenge.

13

Responding to the jurisdictional challenge, plaintiffs identified several

provisions of the North Carolina long-arm statute, G.S. Sec. 1-75.4, as
alternative grounds for the exercise of jurisdiction. We confine analysis to only
one of those identified, because we think that on the written submissions before
the court a prima facie showing of jurisdiction under that provision was clearly
made.

14

N.C.G.S. Sec. 1-75.4(1)d. asserts general jurisdiction, based on "local presence

or status," over persons properly served under applicable process rules,2

15 any action, whether the claim arises within or without this state, in which a
[i]n
claim is asserted against a party who when service of process is made upon such
party:
16

....

d. [i]s engaged in substantial activity within this state, whether such activity is
17

wholly interstate, intrastate or otherwise.

18

The district court, apparently seeing this as the most likely jurisdictional ground
of those identified, rejected it because the "activities" alleged in plaintiffs'
complaint were all "carried on before the complaint was filed." This, said the
court, failed to show, as the statute required, that the "activities" must be in
progress "when service of process is made."

19

Under the proper test for a prima facie showing of jurisdiction, this was too
stringent a requirement. Laying aside the question whether absolute
contemporaneity of "activities" and service of process is constitutionally
required by the "when service ... is made" phrase,3 contemporaneity can in any
event be readily inferred here from the bald allegations of the complaint. As
earlier indicated, in the course of alleging the misrepresentations which
induced their own purchase of a "lifetime partnership," the Combs' alleged that
this was pursuant to a "scheme or artifice to defraud" which over time resulted
in the fraudulent sale of "over 55,000" such "partnerships" through defendants'
solicitation activities originating in part in the state of North Carolina. It is
readily inferable, under the tolerant prima facie test, that the activities required
to sell such a volume of partnerships were sufficiently "substantial" in volume
and long in duration to bring them within the volume and temporal
requirements of G.S. Sec. 1-75.4(1)d.

20

The district court therefore acted prematurely in dismissing the pendent statelaw claims for lack of personal jurisdiction. As earlier indicated, the prima
facie showing of personal jurisdiction as to the state-law claims would also
defeat on the present record any challenge to jurisdiction with respect to the
RICO claims. This does not of course relieve the plaintiffs of the burden
ultimately to prove the existence of statutory grounds by a preponderance of
evidence, whether in a separate evidentiary hearing adequate to resolve
dispositive factual questions, or as an incident to trial on the merits. In
attempting to carry this burden, if jurisdiction remains in dispute, the plaintiffs
will not of course be restricted to proof under Sec. 1-75.4(1)d. of the state longarm statute, but may rely on any other state jurisdictional provision that may be
relevant.4

B
21

We can quickly dispose of the district court's dismissal of the civil RICO claims
for failure of the complaint sufficiently to allege a "pattern" of racketeering
activity, an essential element of each of the claims. As the court understood the
"pattern" requirement of this tormented statute, its gist was that there must be

"more than one racketeering activity," and as the court assessed the complaint,
it failed in this respect.
22 only racketeering activity alleged by Plaintiffs is the infliction of a single basic
The
injury--the sale of partnerships by misrepresentation. The mere fact that plaintiffs
allege that on information and belief over 55,000 lifetime partnerships were sold,
which would obviously require numerous pieces of paper, and a great number of
mailings and telephone calls to a great number of persons, does not mean that each
mailing and telephone call was a separate transaction so as to constitute each mailing
or telephone call a racketeering activity.
23

Combs v. Bakker, 692 F.Supp. 596, 601 (W.D.N.C.1988).

24

This analysis, seemingly requiring at least two separate types of racketeering

activity, in the sense of separate goals for otherwise sufficiently related and
continuous predicate acts--say fraud and extortion, or murder and arson--finds
no support in Supreme Court and circuit precedent in force at the time of the
district court's decision. See, e.g., International Data Bank v. Zepkin, 812 F.2d
149, 155 (4th Cir.1987). In the interval since the district court's decision, we
have indeed had the occasion specifically to reject it as a proper basis for
pattern analysis. See Brandenburg v. Seidel, 859 F.2d 1179, 1186 n. 6 (4th
Cir.1988) ("fact that the discrete objectives of each of the predicate acts were
all of the same basic type would not ... prevent the predicate acts from
constituting a pattern"). Much more critically, in that same interval the
Supreme Court has emphasized anew that the hallmarks of the pattern
requirement are simply the relatedness and the continuity of the required
predicate acts constituting a "racketeering activity" rather than the singleness or
multifariousness of the activity's ultimate goals or purposes. H.J., Inc. v.
Northwestern Bell Tel. Co., --- U.S. ----, 109 S.Ct. 2893, 106 L.Ed.2d 195
(1989).

25

Here the allegations of multiple predicate acts of fraudulent misrepresentations

by use of interstate wire and mail facilities, obviously "related" by design, and
"continuous" enough to have claimed upwards of 55,000 individual victims in
necessarily independent transactions, sufficiently suggests a "threat of
continued criminal activity" to constitute a RICO pattern under the Supreme
Court's most recent analysis of the requirement in H.J. Id. at ---, 109 S.Ct. at
2900.

26

Whether plaintiffs can indeed prove the existence of a sufficient pattern along
with the other elements of the RICO claims here pleaded of course remains to
be seen. But on the pleading of their complaint they were entitled to attempt

proof.
III
27

For the above reasons we conclude that the district court erred by prematurely
dismissing certain of the claims for lack of personal jurisdiction, and further
erred by dismissing the civil RICO claims for insufficiency of the complaint's
allegations of a pattern of racketeering activity. Accordingly we must vacate the
judgment of dismissal and remand for further proceedings consistent with this
opinion.5

28

VACATED AND REMANDED.

In view of our disposition of the appeal, we need not address the validity of the
district court's apparent perception that (a) nationwide service of process under
18 U.S.C. Sec. 1965(b) was not available here, and (b) would not in any event
have served to confer jurisdiction as to the pendent state-law claims

Though the district court did not rule on the defendants' specific challenges to
the sufficiency of process and service of process as well as to personal
jurisdiction, we note from the record that all three defendants were served by
methods authorized for use in conjunction with assertions of jurisdiction under
the North Carolina jurisdiction statutes: the Bakkers, by personal service in
California; Dortch by registered mail received at a Florida address. Whether the
defendants actually intended to challenge the form and mode of process
independently of their more basic challenge to the existence of grounds for
personal jurisdiction cannot be determined from the record

North Carolina's long-arm statute has been interpreted by that state's highest
court as intended to reach to constitutional limits. See Dillon v. Numismatic
Funding Corp., 291 N.C. 674, 231 S.E.2d 629 (1977)

We note that in addition to the specific provisions identified by plaintiffs and

considered by the court, the defendants identified the "local act-foreign injury"
provision of G.S. Sec. 1-75.4(3) as an arguably relevant one whose availability
they sought to discount

Still technically pending for resolution in the district court are the defendants'
challenges to venue, to subject-matter jurisdiction, and to failure to join PTL as
an indispensable party. Though the district court has not addressed these
challenges in view of its disposition of the case, we have thought it appropriate

in the interest of justice to do so. None of these challenges has, in our opinion,
any merit on the record as presently constituted